Theories of Surplus Value, Part I, Chapter 3 - Part 13

It is a weakness of Smith's analysis, and one inherited by Ricardo, that he does not analyse surplus value as a specific category, but only analyses its specific forms of profit, rent and interest individually. So, having analysed profit as being the appropriation of this surplus value, by capital, as an appropriation justified on the basis of its provision of the means of production and consumption, Smith then turns his attention to that other main requirement for production – land – and the appropriation of the surplus value, in the form of rent.

Smith writes,

““As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce… He” (the labourer) “must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land” ([ibid., p. 55], [Garnier], l.c., pp. 99–100).” (p 82)

Similarly, interest forms a separate portion of surplus value, but Smith conceives it only as “a derivative revenue” that is paid from some other form of revenue.

Marx then discusses some of the various alternatives to where this interest is paid from.

If interest is not paid out of the profit made from the use of borrowed money-capital, for productive purposes, it must be paid, Smith says, from either rent or wages. If it is paid from wages, but wages, after the deduction, remain at the average level, i.e. equal to the value of labour-power, then this interest is really just another form of profit. Either the deduction of interest from the wage must force the wage down below the value of labour-power, which means it cannot be reproduced – this happens with “undeveloped capitalist production” (p 82-3) – or else the wage paid to the worker must be higher than it otherwise would have been, so as to be able to pay the interest, whilst still being sufficient to reproduce the worker.

In this case, the profit is simply split differently, so that the portion of profit obtained by the productive-capitalist is lower than it would have otherwise have been, because the wage is higher by the amount of the interest, but the worker is no better off, because that portion of their wage is now appropriated by the money-capitalist, in interest.

Another alternative here is that,

“... perhaps the borrower is a spendthrift, who contracts a second debt in order to pay the interest of the first” ([ibid., p. 581, [Garnier], l. c., pp. 105–06)” (p 83)

This was frequently seen in the case of the aristocracy, but something similar arises today with those in the clutches of the pay day lenders, except the borrowing here is often simply to be able to exist.

“Interest is therefore either a part of the profit made with the capital lent; in this case it is only a secondary form of profit itself, a branch of profit, and thus only a further division between different persons of the surplus-value appropriated in the form of profit.” (p 83)

If interest is paid out of rent, then it is simply a subdivision of rent.

The only other scenario Marx says, is where the borrower pays the interest out of their or someone else's capital. In that case it is not a deduction from surplus value, but merely represents a transfer of wealth from one set of hands to another. It does not then represent a part of any net increase in value, merely a redistribution of the existing wealth. This is the case with things such as equity release schemes, whereby people are conned into giving up a portion of their wealth, held in the form of their home or pension, in return for immediate cash.

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